Credit Card Guide
Follow Us  twitter facebook You Tube Google+
Credit Cards > Credit Card News > Ask Erica > How much money needed to start a credit card?


How much money needed to start a credit card?

May 2, 2014
Ask Erica
email print comment

QHi Erica,

How much money do I need to start out a credit card? –Stefani

ADear Stefani,

Great question! There are two basic varieties of credit cards. With one, you must provide money upfront. With the other, you don't.

The first type is a secured account. You must provide a specific amount of money to the issuer to get one. The amount varies by the card and company, but in general, you'll need to pony up at least a few hundred dollars. In exchange, you'll be granted charging rights equal to (or sometimes considerably more than) that sum.Ask Erica

The money you provide is not a payment. It's the same concept as a security deposit a landlord would take from a tenant before renting a home. You'll get the cash back, (with even a bit of accumulated interest) when you close the account. However, just as a landlord would deduct the cost of a ruined wall from your security deposit when you leave, the credit issuer also reserves the right to withdraw a delinquent payment if you run up the bill and don't pay when you should.

Secured credit cards are great first cards. Because the issuer assumes little risk, it is more apt to grant secured cards to those with unestablished credit histories. Aside from the security deposit, though, you'll probably need a job, as most issuers want to be sure that you have the means to pay for what you borrow.

Another benefit for you is the security deposit itself. It's forced savings! You'll always know you have that money set aside, and if you need it, you can close the account and reclaim the funds.

The second type of card is the unsecured account. As the name implies, the issuer does not require a cash deposit. Instead, qualification is based heavily on past credit behavior and income.

While there are unsecured cards to fit most consumers' credit profiles, if you have a proven track record of being financially responsible, you will get a card more easily. The issuer will check your credit file when you apply. It will also access your credit scores, which are ratings based on the data found on those credit reports. Unsecured cards are usually best for those who have good credit or better.

Whether secured or not, be aware of extra costs for the card you are considering. Some geared to the new-to-plastic crowd come with fees, such as for the application processing. Annual fees are common, too, even with “elite” cards. Weigh what it costs to keep the card alive for the year against what you get for the money. For example, some travel cards charge an annual fee but if you fly frequently, the perks can easily make up for the outlay.

Whichever card you get, treat it well. Pay your bill on time, and pay in full every month. Don't use your card as a long-term loan. Keep your cards' debt below 30 percent of the credit limit. These steps will improve your credit score over time, improving your chances at getting better cards with higher limits.

And remember, what you do with your first card will be a part of your record for many years to come.

Got a question for Erica? Send her an email.




How to make the most of a new travel rewards card - Charge what is required to secure the one-time bonus and make payments on time, then you will be on your way to getting your plane tickets...

Debt settlement unlikely until you're behind on payments - That doesn't mean you can't try, but settlements have their downsides...

How hard inquiries hurt your credit score - Applying for a loan or credit card will trigger a hard inquiry, which will ding your score temporarily...



  If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the ‘Post to Facebook’ box selected, your comment will be published to your Facebook profile in addition to the space below.

Our editorial content is not sponsored by any bank or credit card issuer. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Secure SSL Technology
Secure SSL
Twitter Facebook You Tube Google+
About Us Privacy Policy Editorial Team Terms of Use
Contact Us California Privacy Rights Media Relations Site Map

Close X